Kendall Corp.purchased at par value $75,000 of Shrem Company's 8% bonds that mature in three-years.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.When the bonds mature,Kendall should prepare the following journal entry:
A)debit Debt Investments−HTM,$75,000; credit Cash,$75,000.
B)debit Cash,$6,000; credit,Unrealized Gain-Equity,$6,000.
C)debit Cash,$75,000; credit Debt Investments−HTM,$75,000.
D)debit Unrealized Gain-Equity,$6,000; credit Cash,$6,000.
E)debit Cash,$75,000; credit Debt Investments−Trading,$75,000.

Question

Quizplus · Accepted Answer

When the bonds mature, Kendall will receive the full face value of $75,000 as well as any accrued interest. Therefore, the journal entry will involve debiting Cash for $75,000 and crediting the original investment account, Debt Investments - HTM, for the same amount. There is no reason to record an unrealized gain or to switch to the trading portfolio, as the company has already stated its intention to hold the bonds until maturity.